A balloon is flat and small when there is no air inside it. When air is blown into the balloon, it begins to grow and gets bigger and bigger until it reaches its limits. Inflation, in some ways, is similar to ballooning. It will continue to grow and will only stop when something is done to stop it. Inflation can cause serious damage to an economy, especially during a recession. What is inflation, what are its causes and effects and what can be done to prevent it? These are just some of the questions surrounding this topic. First of all, what exactly is inflation? Inflation is simply an increase in the general price level of goods and services. For example, if the inflation rate is 2% per year, then in theory a $1 pack of gum will cost $1.02 per year.[1] So, inflation fundamentally reduces the purchasing power of a currency and reduces the amount of goods you can buy. There are also different types of inflation like deflation, hyperinflation and stagflation. Deflation is the opposite of inflation and is the decline in the general price level. Falling prices usually lead to negative effects such as lower prices, lower profits, higher unemployment, and non-repayment of debts. Hyperinflation is the extreme type of inflation. Usually when this happens, the price increases happen extremely quickly and are out of control. Hyperinflation is a situation in which price increases are so uncontrollable that the concept of inflation no longer makes sense.[2] There have been many cases of hyperinflation throughout history, some larger than others. For example, the most infamous case of hyperi...... middle of paper ......lacks a market and pays higher prices. Although price caps can help slow the rate of inflation, it won't last forever. These are just some of the steps that can be taken to prevent inflation. Inflation mainly has negative effects on an economy, particularly present during recessions. So, to summarize, inflation is simply the increase in the general price level. This affects the economy of almost every country on the planet, usually at a small rate, on the order of 1-2%. Inflation can be carefully kept from rising too high, which is good for any economy. The questions: What is inflation, what are some of the causes and effects of inflation, and what can be done to prevent it? All issues that need to be considered when dealing with inflation and which, when considered carefully, can be very important to some governments..